The European Commission has criticized international credit ratings agencies in the wake of the decision by Moody’s Investors Service to downgrade Portugal’s debt to “junk” status.

The timing of Moody's decision is not only questionable, but also based on absolutely hypothetical scenarios which are not in line at all with implementation, said Commission spokesman Amadeu Altafaj.

This is an unfortunate episode and it raises once more the issue of the appropriateness of behavior of credit rating agencies.

Manuel Barroso, the Commission’s President, suggested that Moody's decision added another speculative element to the situation.

Ratings agencies have repeatedly downgraded the debt of Portugal and Greece – two countries at the vortex of the European debt crisis, making it virtually impossible for the continent to get its financial house in order.

Greece’s Foreign Minister Stavros Lambrinidis earlier described the activity of such agencies' as madness.

Speaking at a conference in Berlin, Lambrinidis complained that the ratings firms are exacerbating an already-bad situation.
Specifically, he ventured that Moody’s move to downgrade Portugal was based on the assumption that Lisbon needed a second bail-out, not on any failure by that country’s government to enact economic reforms.

That assumption, he added, had the wonderful madness of self-fulfilling prophecy – since it will make it more difficult for Portugal to borrow.

Wolfgang Schaeuble, the German Finance Minister, said at a recent news conference that he would like to break the oligopoly of the ratings agencies and control their influence (referring to the big three agencies: Moody’s, Standard & Poor’s and Fitch).

Barrosso also wondered why none of the big three ratings agencies are based in Europe.

[This] shows there may be some bias in the markets when it comes to the evaluation of specific issues of Europe, he said.